Nvidia’s Q2 Earnings Soar 122% on AI Boom, but Stock Drops on Production Challenges
Nvidia, the leading graphics processing unit (GPU) manufacturer, reported a stellar second quarter of its fiscal year 2025, with revenue reaching $30 billion, a 122% year-over-year increase. This impressive performance was driven by the surging demand for its AI chips, exceeding analyst expectations of $288.6billion.
The company’s Q2 earnings report, released on August 29th, showcased a strong performance across various segments. Gaming revenue, while still a significant contributor, grew by 16% year-over-yearto $2.9 billion, surpassing analyst estimates of $2.79 billion.
Nvidia’s adjusted gross margin reached 75.7%, exceeding the previous year’s 71.2% and analyst expectationsof 75.5%. The company also reported adjusted earnings per share of $0.68, significantly higher than the previous year’s $0.27 and analyst estimates of $0.64. Net income surged to $16.6 billion, a 168% year-over-year increase, surpassing analyst expectations of $14.64 billion.
Despite these impressive results, Nvidia’s stock price dropped by over 6% in after-hours trading. This decline was attributed to the company’s disclosure of production challenges with its highly anticipated new Blackwell chip.
Nvidiaacknowledged that Blackwell, designed for AI workloads, is facing difficulties in production, leading to lower-than-expected yields. The company is currently implementing measures to improve production efficiency, but the impact on its future revenue remains uncertain.
Blackwell samples have been shipped to partners and customers, Nvidia stated in its earnings release. Blackwell ramp is scheduled to begin in Q4 and continue into fiscal 2026. We expect Blackwell revenue to be in the billions of dollars in Q4.
Despite the production hurdles, Nvidia remains optimistic about Blackwell’s potential, highlighting the unbelievable market demand for the chip.The company also emphasized the strong demand for its existing Hopper chips, with increased shipments expected in the second half of fiscal 2025.
The company’s positive outlook is further supported by its decision to authorize an additional $500 million in share buybacks, demonstrating its confidence in future growth.
Nvidia’s Q2 earnings report highlights the immense potential of the AI market and the company’s dominant position within it. However, the production challenges with Blackwell serve as a reminder of the complexities involved in scaling up advanced chip manufacturing.
The coming quarters will be crucial for Nvidia to address these challenges and ensurea smooth transition to mass production of Blackwell. The success of this new chip will be critical for the company’s continued dominance in the rapidly growing AI market.
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